EMC to Acquire VMWare

SAN FRANCISCO (12/16/2003) - Storage giant EMC Corp. announced Monday that it would acquire VMWare Inc. in a cash transaction valued at approximately US$635 million.

VMWare is considered by many to be the leading technology for server consolidation on Intel-based server hardware and has enjoyed great success in the Linux community, so acquisition by EMC only adds to their future prospects as an important technology for Linux server adoption and integration into the enterprise.

The company's virtualization technology has garnered acclaim in the Linux community as a way to run both Microsoft Windows and Linux servers on the same hardware (as well as NetWare Inc.) -- the ability to consolidate on the same server hardware being an important part of migration strategies for Windows and Linux users.

During EMC's briefing on the acquisition, EMC's CEO Joe Tucci stated the organization's goal was to "virtualize information structure" and feels that VMWare offers EMC not only to help virtualize the information structure but the server structure of the enterprise. Diane Greene, VMWare's CEO, noted that VMWare has over 5000 server virtualization customers and over 2 million desktop virtualization customers. Currently desktop products account for less than 50 percent of their revenue with server revenues growing at a faster rate than desktops. When asked why EMC and VMWare make a good match, the companies commented that EMC gives VMWare to scale more quickly than on their own accord -- and to also leverage EMC's enterprise presence, worldwide sales force numbering 4500 and 7500 person customer services organization.

Besides setting the stage for server consolidation and improved utilization, VMWare has also enjoyed success as a way for Linux desktop users to run Windows operating systems on the same hardware. It remains to be seen whether EMC and VMWare will have any dedication to the desktop PC market as EMC is regarded as an enterprise software company focusing on the larger customer rather than the consumer or small business.

EMC indicates that VMWare with its approximately 370 employees will operate as a software subsidiary upon completion of the acquisition led by current VMWare chief, Diane Greene. Also it was noted that VMWare has been cash flow positive for the last two years and profitable since January 2003. The official announcement can be found at EMC's website. The acquisition is subject to customary closing conditions and regulatory approvals, and the transaction is forecasted to be complete early in the first quarter of 2004.

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